Published 4:00 am, Tuesday, August 24, 2004

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MONDAVI18_HO Left to right, Mondavi siblings Tim Mondavi, Michael Mondavi and Marcia Mondavi Borger, with their father, Robert Mondavi. PHOTO COURTESY: ROBERT MONDAVI WINERY
also ran 06/06/2004 Charles Schwab Charles Schwab ALSO RAN 4/4/04 The Mondavi vineyards in Napa: The documentary &quo;Mondovino&quo; casts Mondavi as a conglomerate out to ply the planet with Everywine. CAT hurry 3s color less

Shares of Robert Mondavi Corp. jumped nearly 10 percent Monday on news of a corporate restructuring that would reduce the Mondavi family's control in the company, a move analysts said could be a precursor to a sale of part of the business.

The plan, announced late Friday, would cut the voting power of the Robert Mondavi family to 39.5 percent from 84.9 percent by exchanging the family's super-voting Class A shares for regular Class B shares, eliminating the dual stock structure.

At the same time, the Oakville (Napa County) company plans to split into two divisions, one managing luxury brands like Opus One and Robert Mondavi Winery Napa Valley, and the second for under-$15 "lifestyle" brands such as Woodbridge by Robert Mondavi.

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"The market views this as a first step toward perhaps a sale or a breakup of Mondavi that would conceivably unlock value," said analyst Timothy Ramey of D.A. Davidson in Lake Oswego, Ore.

The changes, subject to a shareholder vote Oct. 29, make Mondavi Corp. "more vulnerable to a bid and easier to value as discrete businesses," possibly facilitating the sale of the mass-market brands and leaving the Mondavi family free to focus on its high-end lines as a privately held company, Ramey said.

Robert Mondavi, now 91, and his son Timothy, the company's winemaker, have been considering such a move since the late 1990s, a source close to the family said.

Mondavi Corp. shares jumped 9.4 percent Monday to $40.69, down from a daytime high of $43.54. Mondavi stock has risen steadily since early July amid a broad market dip, with particularly steep gains in the past week as news of the plan apparently leaked.

In a news release, the company characterized the plan as part of a broader program, now in its third year, to rationalize Mondavi's structure and institute corporate governance practices in line with the best-run public corporations.

"It has become increasingly clear in the new wine environment that $50 Napa Valley Cabernet and $6 premium wines require different business models," Chief Executive Officer Greg Evans said in the release.

The company said its restructuring and recapitalization are "not directed at selling the company." The goals are to "provide our company with the best corporate governance practices available today and create value for all shareholders."

Mondavi has wrestled for years with the best way to manage its vast portfolio of wines, which range from about $5 to $150 a bottle and include imports from France, Italy and Australia. A company spokeswoman said Evans and Chairman Ted Hall were unavailable for comment.

"That's been true since 1978, when they bought Woodbridge, which is 85 percent of their production and in a very difficult part of the market, with competitors like Two Buck Chuck (Trader Joe's $1.99 Charles Shaw brand) and Yellow Tail," a fast-growing import from Australia.

The Mondavi family has been riven with internal tensions for years, especially between Michael and Timothy, Robert Mondavi's sons, who have held top positions at the family winery and now share the title of vice chairman.

Distancing Mondavi's supermarket brands from their high-end cousins is an idea that has been championed for years by Robert Mondavi, now the chairman emeritus, and Timothy, his younger son, people familiar with the company say.

Both believed that expensive brands like Robert Mondavi Winery, which specializes in pricey Napa Valley bottlings, were compromised by association with Woodbridge by Robert Mondavi and Robert Mondavi Private Selection.

Michael, who was chief executive until 2001 and chairman until January, preferred to maintain a close link between the brands.

Mondavi Corp. has long been one of the most colorful companies in Napa and is arguably Napa Valley's flagship brand, built on the charisma and aggressive salesmanship of its founder. It was founded in 1966, after Robert punched his brother Peter and was forced out of his family's Charles Krug Winery.

While the Mondavis are still by far the largest shareholders in the business, they seem to be leaving much of the company's direction to the CEO, Evans, and chairman, Hall, a former McKinsey & Co. consultant and the owner of Long Meadow Ranch and Winery in St. Helena.

As part of its announcement, Mondavi said it would buy back $30 million in publicly traded shares, which is viewed as compensation to public shareholders for the dilution of the Class B stock.

Mondavi Corp. will also incorporate in Delaware "because of the state's modern corporate laws and its history of dealing with a range of corporate matters," the company said. Ramey noted that Delaware law provides more defenses against a takeover.

The family would receive 1.165 Class B shares for each Class A, boosting its holdings to 7 million shares from 6 million.

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